a ratio is a arithmatical relationship of one number to 
another.ratios are basically of four type:
1 liquidity ratio:
                  measures the short term solvency or 
financial position of a firm. short term paying capacity of 
and ability to meet its current obligations.like current 
ratio,liquid ratio etc.
2 leaverage ratio:
                 measures the firm ability to pay interest 
cost and repayment of long term obligation. like debt 
equity ratio, interest coverage ratio
3. activity ratio:
                  measures the efficiency with which the 
resources of a firm have been employed. like stock turnover 
ratio,debtor turnover ratio.
4. profitability ratio:
                      mesures the overall performance and 
effectiveness of the firm. like net profit ra

Raio Analysis is one of the most powerful tools of 
financial analysis. It is used as a device to analyze and 
interript the financial health of enterprise. just like 
docter examins a patient body temperature like this etc.

equity
liability
asset

Ratios are the arithmetic relationships between two variables.
Eg: Liquidity Ratio, leverage Ratio, Coverage Ratio,
Profitability Ratio etc.

ratio is refers to the numerical or quantitative
relationship between two items of financial statements.we
can find from the ration analysis strength and weakness of
the firm as well as historical performance and current
financial position.

Liquidity Ratio : provide information about the 
organisation's ability to meet its short term financial 
obligations.

Asset Turnover Ratio : how a firm efficiently utilizes its 
assets.

Financial leverage ratio : measure the extent to which firm 
is using longterm debt.

Profitability ratio : several different measures of the 
success of the firm @ generating profits.

Dividend policy ratio : indicates dividend policy of the 
firm and prospects for future growth.

Ratios are classified into 4 types they are as follows: 
a)Liquidity Ratios
b)Leverage or Capital Ratios
c)Profitablity Ratios
d)Turnover Ratios

a) Liquidity Ratios are as follows i) Current Ratio; ii) 
Acid-Test Ratio or Quick Ratio;

b) Leverage or Capital Ratios are as follows i) Debt - 
Equity Ratio; ii) Debt - Asset Ratio; iii) Interest 
Coverage Ratio; iv) Debt Service Coverage Ratio;

c) Profitablity Ratios  i) Gross Profit Ratio; ii) Net 
Profit Ratio; iii) Return on Total Assets; iv) Return on 
Capital Employeed; v) Return on Shareholders Equity;

d) Turnover Ratios  i) Inventory Turnover Ratio; ii) 
Debtor's Turnover Ratio; iii) Average Collection Period; 
iv) Fixed Assets Turnover Ratio; v) Total Assets Turnover 
Ratio.

1. Profitability Ratio
2. Activity Ratio
3. Solvency (Leverage) Ratio
4. Liquidity Ratio
5. Turnover Ratio